Over the last few days, the stock market has been up and down. Huge selloffs late last week sent the stock market plummeting. Then, stocks rebounded rapidly early this week.
Fears of the spread of COVID-19 (Coronavirus) are likely to blame. Additionally, an ongoing presidential election adds more uncertainty to market behavior.
Those with memories of the 2008 recession are scared these declines may mean another recession.
As an employer, your employees may be getting fearful with their retirement savings. But for those trying to create a healthy retirement fund, these jumps shouldn’t get your attention. Here’s why.
Timing the Market
Timing the market means intentionally buying stocks at a low price and selling high. It’s a way to maximize earnings investing in the stock market.
Unfortunately, it’s nearly impossible to know when stocks are going to dip and rise.
In a turbulent market, some investors try to buy stocks when they plummet.
Timing the market does have an upside, but getting it wrong can be costly! The best investment strategy for casual and novice investors is to set-and-forget.
Additionally, your retirement plan may not be designed for frequent trading. Costs associated with buying and selling may outweigh potential upside.
Long-Term Investment Strategy
Experts agree that if your goals are far off, long-term investing strategies are smart. Investing a fixed amount each month is an effective way to avoid short-term losses.
In fact, investing a fixed percentage of your income into a retirement plan is more balanced than trying to ride the wave of stocks.
Over the long-term, average returns of the stock market remain consistent. You can estimate your long-term portfolio returns using a simple retirement calculator.
Talk to employees about their long-term financial goals. See if they line up with their investment strategy.
The Next Recession
Recent peaks and valleys have employees worried a recession is around the corner. Unfortunately, there’s no way to know for sure.
Some economists warn that political outcomes may influence the markets. Others say the economy is as stable as ever.
Trying to time investments around a volatile market can lead to large losses. Recession or not, there is no best time to invest.
While there are no guarantees, the stock market averages between 8-12% returns over the long term.
The market will likely continue to jump up and down over the coming weeks and months. Talks of recession and market fluctuation will also prevail. But for long-term investors, these shouldn’t occupy much mind.
If employees are worried about turbulent markets, try to put their mind at ease. Use the resources provided by your retirement provider to give them guidance. Edukate’s educational resources also help employees navigate their retirement goals.
While the markets may waver, your confidence shouldn’t!
DISCLAIMER: This content is only for informational purposes. Do not use this information as investment or financial advice. Nothing presented is a recommendation or endorsement by Edukate to buy or sell securities or other financial instruments. Please consult a qualified professional financial and/or tax advisor to discuss your individual financial and tax situation.